SFAS No. 87 expanded disclosure of underfunded DB liabilities that predominated during the late 1980s and early 1990s by comparing pension fund asset and obligation market values. However, application of more reliable current compensation totals, rather than anticipated higher future salaries, for calculating pension obligations within the final version of SFAS No. 87 effectively reduces potential long-term pension amounts appearing in annual fiscal reports. SFAS No. 87 attempts to recognize pension expense under assumed economic and financial market changes in plan asset and obligation balances.

Depressed investment portfolio valuations coupled with generous benefit grants in lieu of wage increases during the early 1990s initially fashioned numerous underfunded pension liabilities under SFAS No. 87 procedures. However, ensuing above-average market returns and benefit sponsor decisions enabled some businesses to more favorably reflect pension plan financial positions under SFAS No. 87 principles throughout the second half of the same decade.

This manuscript will attempt to highlight how economic circumstances, pension funding decisions, and contractual agreements can combine to establish pension profit centers that may affect user perceptions of earnings quality. Three pension benefit topics will be predominantly examined, including:

* Creation, maintenance, and expansion of pension profit centers
under the SFAS No. 87 financial reporting framework that can
enhance operating profits and agency costs, along with methods to
extend pension income effects over multiple reporting periods;
* Financial reporting citations of the effects of various corporate
strategies on pension income and overall earnings results;
* Future implications of changing economic conditions on pension
plan financial reporting and funding.